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A 4.00% RGDP growth rate would increase our cumulative RGDP (in 2012 dollars) over the next 100 years by 239%, from $6.1 quadrillion (thousand trillion) to $20.7 quadrillion. The present value of RGDP over this 100-year period (i.e., the PV100) would increase by 146%, rising to $3.3 quadrillion from $1.3 quadrillion.

At a 4.00% RGDP growth rate, our federal debt would quickly become insignificant. Both Social Security and Medicare would be sustainable with no benefit-cutting “reforms”.

Going into a period of fast economic growth, it would be important that we not adopt the FairTax at a “static revenue neutral” tax rate. A tax rate that produced revenue neutrality in the first year would give the federal government far too much money to spend in later years.

Also, a static-revenue-neutral FairTax rate simply isn’t necessary. With higher RGDP growth rate delivering an additional $2.0 quadrillion of RGDP PV100, the federal tax take (tax revenues as a percent of GDP) can and should be much lower.

FairTax advocates have proposed a revenue neutral FairTax rate of 23.0%. This is an “inclusive” tax rate, which is directly comparable to an income tax rate. Expressed as a sales tax, which is added on to the price of the item purchased, the tax rate would be 29.9%. This would be much, much too high.

With 4.00% RGDP growth, a FairTax rate of 10.8% inclusive (12.2% add-on) would give the federal government the same spending power over the next 100 years as would our current tax system coupled with the CBO’s 2.26% RGDP growth rate. That is, the PV100 of federal revenues would be $234 trillion in both cases. (In the FairTax case, the $234 trillion would be net of the Prebates paid out.)

Right now, the federal debt held by the public plus the unfunded liabilities of Social Security and Medicare amount to something less than $100 trillion. A FairTax rate of 13.3% inclusive (15.3% add-on) would yield $334 trillion (PV100) in federal revenues, thus allowing us to both maintain spending at planned levels and also pay off all of our obligations.

A move to the FairTax would benefit the poor and the middle class the most. What “the 99%” need most are more jobs and higher real wages. The only thing that can produce these is fast economic growth.

The FairTax would also reduce income inequality. Capital and labor split the sales dollar, with capital taking its share first. The FairTax will lower the cost of capital, and this will raise the percentage of GDP going to workers.

Even if someone worked in the underground economy and received all of their income in cash, they would not be able to avoid paying the FairTax when they go to Wal-Mart. Obviously, if people who don’t report their income are forced to start paying taxes, the citizens who currently report all of their income can pay less.

One feature of the FairTax that would especially benefit poor people is that each person’s Prebate could be capitalized into a line of credit. Assuming a 13.3% (inclusive) FairTax rate, the federal government could afford to lend each American turning 18 up to $44,130. The government would face no repayment risk in doing so, because the new adult’s Prebate would fully service this amount of debt.

A FairTax-based credit line would have a tremendous impact on the lives of kids coming out of foster care programs. For example, a boy turning 18 in Los Angeles could buy a camper, drive to North Dakota, and get a $90,000/year job in the oil fields, rather than becoming homeless in L.A. because he has no money for a deposit on an apartment.

Upon enactment of the FairTax, the federal government could extend to a family of four (two 30-year-old adults, a 4-year-old, and a 2-year-old) a $100,910 line of credit. Once again, there would be no risk to the government, because the family’s Prebates would cover the debt.

The current scandal demonstrates that the IRS cannot be “reformed” into something compatible with a free society. It is a creation of progressivism, and, at its core, progressivism holds that individual freedom is obsolete.

The current imbroglio gives us a golden opportunity to abolish the IRS and institute the FairTax. Only in this way can we secure liberty, promote desperately needed economic growth, and ensure that every young American has a fair chance to become a productive citizen.